A blockbuster year for VC had firms race through pitches at the fastest rate ever

Venture capitalists rewrote the record books in 2021 — in more ways than one.

Not only did VC investments eclipse previous all-time highs in the U.S. and across the globe, swelling industry assets placed pressure on investors vying for deals to fund companies at a frenzied pace, leading VC firms to scan pitch decks and back startups faster than ever before.

According to data from Dropbox’s document-sharing platform DocSend, venture capitalists reviewed pitch decks at an all-time low "time spent on deck" of 2 minutes and 28 seconds in the fourth quarter of 2021, reflecting a decrease of 12% from the prior year.

“Throughout 2021 we saw these record low levels of time on deck because if you don’t say yes to a deal, you know another investor is going to beat you to it,” Justin Izzo, DocSend’s research and content lead, told Yahoo Finance.

The fast pace was in part the result of an increase in both supply and demand. With venture capital funds amassing record-shattering funding to deploy in 2021, the number of startups flocking to firms to pitch and raise cash has grown too, recording an increase of 33% year-over-year in the three-month period ended Dec. 31. Investor interest in those pitch decks was also higher, up 18% from the third quarter.

“There is more competition than ever among VCs and among founders to get a VC’s attention,” Izzo said. “That’s why we see record-level investor activity just clicking through decks, but correspondingly, record low time, because investors are always searching for the next best deal.”

To add to that, VCs know what they want and are moving to get there as quickly as possible, Izzo indicated, noting that investors may jump straight to a specific section of a deck to speed things up, a result of the fast-paced, high-competition venture environment.

Overall, as dealmaking activity ramped across the space, VC engagement with startup pitch decks reached an all-time high in the final quarter of 2021, soaring 55% from the same quarter last year and 44% from 2020 — spikes so significant that Izzo said he had to double check the data to ensure the numbers weren’t a mistake.

DocSend emphasized in its report that even during expected seasonal slowdowns around Thanksgiving and the holiday season in December, investors and founders were more active than they were at their peak in 2020.

'FOMO in the system'

The furious pace of activity, however, also meant that investors may not have been doing as much diligence as they should have, per Izzo.

“What I can say is that we did see some head-scratcher deals that may speak to FOMO in the system,” he said, adding that investors are wary of losing out to competitors and “jealously” guard their dealmaking abilities. “With so much money and so much competition, it could lead to haste.”

The venture capital sphere had a blockbuster year in 2021 by any metric, according to a trove of data unveiled in recent weeks from a variety of industry experts, including PitchBook and Crunchbase.

Compiled in conjunction with the National Venture Capital Association (NVCA), the PitchBook-NVCA Venture Monitor tracked $329.9 billion raised by U.S. venture-backed companies raised in 2021 — or about $904 million every day last year at nearly double the previous record of $166.6 billion raised in 2020.

Separate research from Crunchbase indicated that venture capital also broke global records, with investments totaling $643 billion last year, compared to $335 billion for 2020 — marking 92% growth year-over-year.

Most recently — and further underscoring the whopping activity tracked across the board — a new report from KPMG also found that first-time financings surged in both count and aggregate venture capital invested, hitting $54.3 billion in 2021, up from $31.1 billion the prior year.

Moreover, data suggests that venture capital investment is expected to remain robust into the new year — and VCs vying for deals are likely to sustain the pace of transactions to keep up.

In 2022 so far, DocSend found that VC activity was already up 61% over this time last year, as of the week ended Jan. 18, with investors and founders alike sustaining fundraising energy and a private marketplace that is “going full steam ahead,” even as public markets show uncertainty against the backdrop of interest rate worries.

A banner year in equity markets helped inflate valuations in 2021 and contributed to hasty VC activity as investors eagerly sought out growth opportunities. A potentially weaker public market in 2022, cooled by uncertainty around the Federal Reserve’s next step in monetary policy, could introduce “a little more caution to the private markets as well,” Izzo said. But a potential correction in equity markets wouldn’t necessarily pour over into the private investment landscape.

“Things might slow down a bit, but we won’t see a crash because there is so much money in the private market already and companies are still deploying it,” Izzo told Yahoo Finance. “If private companies are going to fail, they’ll fail much more slowly.”

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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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